Long-term Management Vision and Medium-Term Business Plan
Long-Term Vision KV2027, 2019 Medium-Term Business Plan
Growth strategy must be based on the new reality
- Stronger existing core businesses are essential for growth
- Social issues such as QOL and preventative healthcare create growth opportunities bridging food and pharmaceuticals
Changes in society
- Global increase in natural disasters
- Greater uncertainty caused by drastic changes in economic systems
- Corporations expected to contribute to resolving social issues
Changes in the market
- Maturation of beer market in developed countries global shift towards craft beers and premium products
- Expansion of regulations for alcoholic beverages and mounting pressure to implement sugar tax
- Introduction of public policies to reduce healthcare costs
Redefine business domain to enable sustainable growth
To create value across our world of Food & Beverages to Pharmaceuticals, Kirin Holdings established the Health Science domain to takes advantage of its unique strengths, in addition to the existing business domains, namely the Food & Beverages domain (alcoholic and non-alcoholic beverages businesses) and the Pharmaceuticals domain (Pharmaceuticals Business). In the Health Science domain, Kirin Holdings will grow the business into another core of its business by honing the core fermentation technology and biotechnology that have been cultivated since its founding, and by leveraging the organizational excellence and assets that Kirin Holdings has amassed over the years.
2022 MTBP is the second stage of KV2027
Kirin Group 2022-2024 Medium-Term Business Plan
February 14, 2022
Management Issues for Sustainable Growth—Group Materiality Matrix (GMM)
Kirin Holdings has organized its Management Issues for Sustainable Growth (Kirin Holdings Materiality Matrix (GMM)), which outlines the challenges it should address to operate and develop sustainably in partnership with society. The Group evaluates the GMM from the two perspectives of impact on its business and impact on stakeholders. As the Group considers that the GMM will change over time, it re-evaluates and revises the GMM every time it formulates a three-year Medium-Term Business Plan.
In line with the formulation of the 2022–2024 Medium-Term Business Plan, Kirin Holdings made the GMM better meet social demands by refining the aspects of the GMM and re-evaluating the importance of it in light of changes to the business environment, including the COVID-19 pandemic, and stakeholder expectations.
- There is no difference in importance among the items in each cell.
Based on the outcome produced by FY2021, we will accelerate growth.
- Implementing business structure reforms with an eye to post-COVID-19
- Creating new value
- Increase profit in the Food & Beverages domain that leads cash generation
- Scale up business in the Health Science domain that will become a large pillar of the future
- Strengthen global base in the Pharmaceuticals domain that establishes our position as a Global Specialty Pharmaceutical Company
- Financial indicators are evaluated by excluding the impact of exchange rate fluctuations when overseas subsidiaries are consolidated and other factors. Normalized operating profit and ROA are KPIs for all businesses.
- ROIC = Profit after tax before interest / (Average total interest-bearing liabilities at beginning and end of the period + Average total equity at beginning and end of the period)
- Normalized EPS = Normalized profit / Average number of shares outstanding during period
Normalized profit = Profit attributable to owners of the Company ± Other operating income and expenses and other items after income taxes
|Items||Themes||Non-financial Indicators||Target Level in 2024|
|Environment||Climate Change||Reduction rate of GHG emissions||23%(50% in 2030)|
|Containers and Packaging||Recycling rate of resin for PET bottles||38% (50% in 2027)|
|Water resources||Water use intensity at manufacturing sites with high water stress||3.0kL/kL以下(Under 2.4kL/kL in 2025)|
|Health||Progress of mid-term health science strategy||Achievement level in supporting the maintenance of immune function
1. Recognition rate of LC-Plasma function in Japan
2. Number of people continuing to take LC-Plasma
2. 1,900,000 people
(1. 50% in 2027)
|Achievement level of new value creation in the immunity, brain function, and intestinal environment domains and Achievement level of promotion of collaboration with pharmaceuticals domain||Not disclosed*4|
|Employees||Organizational Culture||Employee engagement score||75%|
|Diversity||Achievement level in “Increasing diversity”*5
1. Ratio of female managers in Japan
2. Ratio of career hires in Japan
|Occupational health and safety||Lost time injury frequency rate*6||0.95
(0.40 in Japan)
- Specific indicators and target levels are not disclosed for strategic reasons, as they include content related to intellectual property.
- The target group is employees of Kirin Holdings.
- Major group companies that have production and logistics functions within the group will be included. Partner companies within the plant premises are also included.
We expect cash flows from operating activities of approximately ¥700.0 billion in total during the three-year period of the 2022–2024 MTBP. The top-priority use of funds is to pay dividends. We will maintain the dividend payout ratio on normalized EPS of at least 40% and plan to pay the total amount of dividends of approximately ¥230.0 billion. In the 2019–2021 MTBP, we planned to make capital expenditures of approximately ¥310.0 billion. In the 2022–2024 MTBP, we classified capital expenditures under foundation investment and growth investment and increased the total amount of capital expenditures to approximately ¥400.0 billion. In addition to usual capital investments, we will secure an investment framework for new growth in the three domains and put more money into the framework to help improve our corporate value.
We will also explore M&A investment opportunities, aiming to expand our business in addition to our organic growth. Particularly in the Health Science domain, where we aim to expand, we will examine broad opportunities available in Japan and abroad. We will procure funds for M&A investments by reducing the size of our balance sheet and selling non-core businesses through portfolio management.
We emphasize balance sheet management in the 2022–2024 MTBP. We seek to optimize working capital by centralizing cash held by the Group companies in Japan and abroad on the global cash management system that we introduced in 2021 and to improve the cash conversion cycle (CCC) through streamlining SCM*7. Through these efforts, we will generate cash of approximately ¥100.0 billion during the three-year period of the 2022–2024 MTBP.
In managing the business portfolio, we will consider selling some businesses that the Board deems non-core businesses after continuous discussions.
We will put a priority on diverting the funds generated through the balance sheet management and portfolio management to M&A investments in order to acquire future growth drivers. Meanwhile, we will flexibly decide on additional shareholder returns centered on the acquisition of treasury share while considering investment opportunities and the balance of cash inflows and outflows.
- Supply Chain Management (SCM) refers to the efficient establishment and management of the supply chain, including the procurement of raw materials, production at factories, and the supply, demand, and distribution of products.
We will put more effort into non-financial initiatives in accordance with the basic policy of the 2022–2024 MTBP. We will build a solid organizational foundation by strengthening our organizational capabilities to achieve innovation with an eye on post-COVID-19, thoroughly utilizing Kirin Holdings’ DNA of focusing on quality, building an SCM system that balances efficiency and sustainability, and strengthening governance to support value creation. In light of stakeholder expectations in addition to the strengthening of our organizational capabilities, we have set again non-financial targets so that they are directly connected to economic value. We will improve the steps of input–business–output in our Value Creation Model and produce greater outcomes to promote CSV management.
Disclosure of non-financial information
The Kirin Group assesses the resilience of its strategies and the risks and opportunities they pose to society and the company, including issues related to climate change, and proactively discloses information to a wide range of stakeholders.
We further promote medium- and long-term value sharing with shareholders and investors by linking key performance indicators (financial and non-financial targets) and annual normalized operating profit with remuneration of officers.
|Performance evaluation indicators|
|Yearly bonus||Consolidated normalized operating profit*8, individual performance evaluation|
|Trust-type stock compensation*9||Normalized EPS, ROIC, non-financial evaluation*10|
- Normalized operating profit is a profit indicator for measuring recurring performance which is calculated by deducting cost of sales and selling, general and administrative expenses from revenue.
- Non-financial indicators will be determined based on an item-by-item evaluation of the achievement level of specific indicators defined for each item in the three categories of "environment," "health," and "employees," followed by an overall evaluation based on the results of these evaluations and qualitative considerations.
- Non-financial evaluation is an assessment of the progress and the achievement level of the CSV commitment. Specifically, the CSV commitment is comprehensively assessed against initiatives for four key issues (a responsible alcohol producer, health and well-being, community engagement, and the environment).